Samsung SDI eyes capacity expansion as US ESS orders surge; LFP mass production set for October

Samsung SDI said it is reviewing options to secure additional production capacity in line with growing US orders for energy storage systems. The company plans to begin mass production of lithium iron phosphate batteries for the US ESS market in October and start supplying customers before year-end.

Jo Yong-hwi, executive vice president and head of Samsung SDI's ESS business team, said Thursday on a second-quarter earnings conference call that US ESS orders secured to date already cover a substantial portion of the company's production capacity through 2029. "If we factor in projects with a high likelihood of being awarded in the second half, demand is projected to exceed our production capacity from 2028 onward," he said, adding that the company is internally reviewing ways to secure additional capacity.

Jo also provided a more concrete timeline for LFP mass production in the United States. "The prismatic LFP line for US ESS is currently in the production-quality verification stage," he said. "We plan to begin cell mass production in October as scheduled and start supplying customers in the form of our SBB 2.0 solution before the end of the year."

On US supply chain regulations, Jo said the company has secured LFP cathode material volumes primarily from domestic and US suppliers and is building out its supply chain through localization of key components. Under the Inflation Reduction Act, manufacturers must maintain supply chains free of ties to prohibited foreign entities — including Chinese firms — to qualify for tax credits.

Samsung SDI said it expects the ESS market's structural growth to continue even amid concerns about a slowdown in AI data center investment. "Even if the pace of data center expansion slows, the structural growth of the US ESS market remains intact," Jo said. "The importance of ESS is growing due to the expansion of renewable energy and rising demand for grid stabilization, so the impact of any slowdown in AI data center investment on our ESS business will be limited."

The company also expressed confidence in benefiting from the broader proliferation of AI data centers. Jo Han-je, executive vice president and head of strategic marketing, said sales of batteries for uninterruptible power supplies and baseband units are each expected to grow more than 70 percent year-on-year this year. "We hold approximately 40 to 50 percent market share in the UPS and BBU segments, and we maintain higher profitability than other product lines thanks to high barriers to entry," he said.

Jo Han-je said the company's solid-state battery program is also on track. "We are preparing to begin mass production of solid-state batteries in the second half of 2027 as originally planned," he said. "Given the current state of customer collaboration, the first commercial application is likely to be humanoid robots, and we plan to supply humanoid robot samples in the second half of this year." The company intends to expand into electric vehicles and other applications after completing customer validation.

"The humanoid robot market is expected to more than double every year through 2030 alongside advances in AI technology," Jo Han-je said. "Since the battery is a core component that determines operating time, this represents a new growth opportunity for Samsung SDI, which has high-energy-density and high-output technology."

Samsung SDI posted consolidated second-quarter sales of 3.77 trillion won ($2.6 billion) and operating profit of 203.8 billion won. Sales rose 18.5 percent from a year earlier, and operating profit returned to the black for the first time in seven quarters since the third quarter of 2024. First-half cumulative operating profit reached 48.2 billion won, meaning the company achieved its turnaround earlier than the second half it had originally anticipated.

The company said the earnings improvement trend will continue in the second half. Oh Jae-gyun, executive vice president in charge of management support, said ESS sales are set to increase sharply in the second half, driven by growing demand for utility-scale ESS and UPS in the United States, with profitability also expected to remain solid on the back of the new LFP line coming online and the Advanced Manufacturing Production Credit.